Category Archives: Flooding

The above is an interesting article covering the dilemma facing the National Flood Insurance Program. It has some valid points and some challenging thoughts.

One addressing repetitive loss properties, not allowing access to the NFIP if a house has submitted claims equal to twice its replacement value, is intriguing. But, with coastal construction hitting multi-million figures, and flood insurance capped at $250,000, one would have to question who this would benefit most, and who would be most hurt by it. An elderly person’s home being damaged on the waterfront, that was built decades ago, may leave that person both penniless and homeless if they cannot insure their family homestead. However, it would not preclude that property being snatched up for a song and having a new mansion constructed. Making the waterfront more exclusive.

Another proposal in the piece suggests that all homes with mortgages be required to buy flood insurance regardless of whether they are in a flood zone or not. This reinforces the idea that flood insurance is here to protect the banks, not the homeowners. It spreads the associated insurance costs out across more properties, thereby making the program more financially stable, but does not cut across all properties that may be at risk.

Perhaps a better solution, and one that would be less costly to any one part of society, would be to have all homeowner insurance policies include flood provisions and establish a basic flat fee for flood insurance. According to Zillow, the total value of all homes in the United States topped $25.7 trillion in 2013. A 0.01% of home value flood insurance fee could generate $2.5 billion in revenue for flood insurance annually. With more storms the size of Harvey, Irma and Maria expected, at 0.04% of home value, $10 billion could be generated annually at a cost to the average homeowner of about $140 per year. By making flood insurance a standard part of homeowners insurance, the average homeowner could be protected as well from flood damages.

“…which over time could prompt homeowners to vacate the most at-risk areas.”

The “plan” allows the private insurers to siphon off the low risk insurance policies, leaving the federal government with the debt laden ones. Ultimately FEMA is left with greater debt.

If flood insurance were profitable, we would not have created a National Flood Insurance Program. Now that some can see profit around the edges, they want to skim those policies off, leaving a larger unfunded burden for the NFIP.

Perhaps we need to learn a bit from the “six months of rain in twelve hours” that hit Wisconsin and realize these are natural disasters that affect the nation. While insurance for them is important, it should be one that covers wind, rain, flooding, tornadoes, wild fire, volcanic activity, earthquakes and mud slides. Create one risk pool for all. Or, maybe just realize the nation has an economic interest in fast recovery from natural disasters and plan accordingly in the federal budget.

We will continue to monitor the update to the National Flood Insurance Program. We are working with Representative Tim Whelan to set up a meeting with our Congressman and Senators on this reauthorization.

As reported in this article, many of the proposals will dramatically increase costs to homeowners located in the flood zone. Given actual amounts Dennis residents have received in the past from the NFIP, alternatives are a must.